SUPERIOR COURT OF JUSTICE - ONTARIO
COURT FILE NO.: CV-11-431927
and COURT FILE NO.: CV-13-472728
DATE: June 24, 1914
RE: CLEANOL INTEGRATED SERVICES LTD. v QUINTIN JOHNSTONE
AND RE: JOHNSTONE v YUEH and GIAMPETRO
BEFORE: Master C. Albert
HEARD: June 19, 2014
COUNSEL:
L. O’Connor for Cleanol, Yueh and Giampetro, tel: 416-365-1110; fax: 416-365-1876
Jonah Arnold for Johnstone, tel: 416-640-0508; fax: 416-848-0200
ENDORSEMENT
Cleanol Integrated Services Ltd. (“Cleanol”) and Dorothy Yueh ask the court for an order precluding Mark Arnold from acting for Quintin Johnstone in this litigation. A ten day trial is scheduled to begin on August 5, 2014. The trial date was fixed by order on November 25, 2013 and marked peremptory on all parties.
On May 22, 2014 Cleanol and Ms Yueh learned that Mr. Johnstone intended to have Mark Arnold assist his counsel of record, Mr. Jonah Arnold, with the trial. Mr. Johnstone does not propose to appoint Mark Arnold as counsel of record.
Leave for interlocutory motion granted
- Subsection 67(2) of the Construction Lien Act, R.S.O. 1990, c.C.30 applies. Leave is required to bring an interlocutory motion. The moving party must satisfy the court that the motion is either necessary or will expedite resolution of the dispute. In this case Cleanol and Ms Yueh argue that the motion is necessary because it raises an important procedural issue on which the parties are entitled to a ruling before trial. I agree. The reasoning of Master Sandler in Toddglen Construction Ltd. v Concord Adex Develoment Corp[1]. applies. Counsel for Mr. Johnstone did not oppose leave. Leave is granted to bring this interlocutory motion.
Dorothy Yueh’s history with Gardner, Miller, Arnold LLP (Mark Arnold’s law firm)
Cleanol is a small company and Ms Yueh is its sole owner and principal. She is also the sole owner and principal of a related company, 360 Emergency Management Ltd. (“360”).
In 2010 Ms Yueh consulted Mr. Jerry Miller, a partner of Gardner, Miller, Arnold LLP regarding a collection matter concerning 360. A creditor, Rathlin, had threatened to sue 360 for $225,000.00. Because 360 was a company without assets, Ms Yueh was concerned that a judgment against 360 could impact 360, Cleanol and herself personally. She sought advice from Mr. Miller.
Ms Yueh had been referred to Gardner, Miller, Arnold LLP by Quintin Johnstone. Mr. Johnstone is the principal of Samsonshield Inc., an investigation firm that shares a receptionist and office space with Gardner, Miller, Arnold LLP. Ms Yueh retained Mr. Miller to advise her and to negotiate a settlement with Rathlin on her behalf, which he did. The threatened lawsuit against 360 settled for $25,000.00.
In her affidavit Ms Yueh explains that one reason that 360 had no assets was that its general manager had been wrongfully redirecting 360’s customers to his own newly formed business. Through Mr. Miller and his law firm Ms Yueh hired Mr. Johnstone’s company, Samsonshield, to investigate the general manager’s activities.
Mr. Johnstone’s history with Gardner, Miller, Arnold LLP
In addition to sharing a receptionist and office space with Gardner, Miller, Arnold LLP and referring clients to the law firm, in or around July 2011 Mr. Johnstone retained Mr. Mark Arnold of that law firm to represent him in Cleanol’s claim for payment against him arising from the renovation of his condominium unit. Mr. Mark Arnold is Mr. Jerry Miller’s law partner.
On July 19, 2011 counsel for Cleanol and Ms Yueh wrote to Mr. Mark Arnold raising the conflict issue regarding his representation of Mr. Johnstone. In response, by email dated July 31, 2011, Mr. Mark Arnold voluntarily stepped aside. He wrote:
“Please be advised that we will not be acting for Quintin Johnstone in this matter preferring to avoid any concerns of conflict of interest.”
Mr. Johnstone transferred his file to Mr. Jonah Arnold[2], a lawyer practicing at an unrelated law firm. Mr. Jonah Arnold has been counsel of record since the statement of defence in the Cleanol action was filed on September 12, 2011. As far as Cleanol and Ms Yueh were concerned the conflict issue had been resolved.
Then, by email of May 22, 2014, Mr. Jonah Arnold informed Cleanol and Ms Yueh’s counsel, Mr. O’Connor of Weir, Foulds LLP, that Mr. Mark Arnold would be participating in the litigation. He wrote that Mr. Mark Arnold, “external counsel to our law firm, will be attending and taking an active role during the trial.”
Notwithstanding that this reference has been before the court for over two years, that the challenge to Mr. Mark Arnold’s participation in the action had been resolved consensually almost three years previously and that the trial date had been fixed seven (7) months earlier, Mr. Johnstone disclosed only eleven weeks before trial that he intended to bring Mr. Mark Arnold back as co-counsel.
Does conflict preclude Gardner, Miller Arnold LLP and Mr. Mark Arnold from acting?
Ms Yueh and Cleanol assert that Mr. Mark Arnold is conflicted out of acting against them in these two actions.
The general rule is that a lawyer cannot act against a former client without consent, if the lawyer obtained confidential information from the client that would make it unfair, in the eyes of a reasonable member of the public, for that lawyer to act opposite his or her former client. The overriding principle, as expressed in Saldan General Contractors Inc. v Superior Development Corp.[3] is that it is of the utmost importance to maintain the public’s confidence in the administration of justice. Justice Gareau relies on the leading case of MacDonald Estate v Martin[4] for the three competing factors that must be weighed:
i) Maintaining the integrity of our system of justice;
ii) A litigant’s right not to be deprived of his or her chosen counsel; and
iii) A lawyer’s reasonable mobility in the legal profession (Mobility is not a factor on this motion).
- The most important and compelling factor is the need to preserve the integrity of our justice system[5]:
“The integrity of the judicial system is of such fundamental importance to our country and, indeed, to all free and democratic societies that it must be the predominate consideration in any balancing of these factors”.
Ms Yueh deposes that she shared confidential information with Mr. Miller regarding the financial circumstances of 360, Cleanol and herself personally in the context of developing a strategy over whether to litigate with Rathlin or settle. The ramifications of litigation on her other company (Cleanol) and herself personally were relevant considerations in developing the strategy to settle the Rathlin claim. Mr. Miller’s evidence is that Ms Yueh did not disclose any confidential information to him.
On the issue of whether or not Ms Yueh disclosed confidential information to Mr. Miller, and in the face of conflicting evidence, I prefer the evidence of Ms Yueh for two reasons. The first reason is that for her, this is only a single case, and one that is very important to her. For Mr. Miller, it is merely a small file in a very busy law practice. Ms Yueh is more likely to have a clearer recollection of her meeting with Mr. Miller than would Mr. Miller, who meets with many clients and would have to rely on notes taken, if any, rather than his memory. He did not produce any notes of meetings or phone calls with Ms Yueh.
The second reason I prefer the evidence of Ms Yueh where it conflicts with the evidence of Mr. Miller is that when Mr. Johnstone’s counsel was given the opportunity to cross-examine Ms Yueh viva voce at the hearing of the motion he declined to do so[6].
I prefer and accept Ms Yueh’s evidence that she shared confidential information with Mr. Miller when she met with him in 2010 regarding the lawsuit threatened by Rathlin.
Borrowing from the language of Justice Garneau in Saldan v Superior, supra, at paragraph 19: It is impossible for the court to determine, on conflicting affidavit evidence, whether or not confidential information was received by Mr. Miller from Ms Yueh during the brief time Mr. Miller represented 360, which would give the present client of Gardner, Miller Arnold LLP, Mr. Johstone, an advantage, to the prejudice of Ms Yueh and Cleanol, in the construction lien action before the court. If there was such information received by Mr. Miller, it is not difficult to believe that such information would be shared between Mr. Miller and Mr. Mark Arnold, given their relationship as partners and the size of the law firm Gardner, Miller, Arnold LLP. The right of Mr. Johnstone to counsel of his choice is an important consideration, which has not been overlooked by this court. However, in balancing that interest against the concern to maintain the high standards of the legal profession and the integrity of our system of justice, the latter prevails.
Also relevant to the conflict issue is the fact that Ms Yueh’s dealings with Mr. Miller and his law firm included retaining Mr. Johnstone’s investigation services through his company Samsonshield. In issue in the construction lien trial is whether these services were supplied on a “quid pro quo” basis with each of them providing services at a below market rate. Allegations made in the pleadings are that Ms Yueh provided renovation services and Mr. Johnstone provided investigation services on this basis. Hiring these investigative services through Gardner, Miller, Arnold LLP as part of Ms Yueh’s retainer of Mr. Miller and his law firm raises a concern that is more than merely one of public perception.
The client of a partnership of lawyers is a client of each of the partners. There is no evidence that a barrier around the retainer had been erected at the time that Ms Yueh consulted Mr. Miller. Ms Yueh and her company were clients of the law partnership of Gardner, Miller, Arnold LLP and Mr. Mark Arnold is one of the partners. 360 was not the only client. Ms Yueh was also a client because she consulted with Mr. Miller about the impact of the threatened litigation on her personal assets and those of Cleanol. It does not matter that the lawyer with whom she was dealing directly was Mr. Mark Arnold’s partner and not Mr. Mark Arnold personally.
Mr. Mark Arnold acknowledged the conflict by withdrawing from the file and transferring it out of Gardiner, Miller, Arnold LLP in July 2011 when the conflict issue was first raised by Ms Yueh and Cleanol. I find it less than forthright that now, three years later, he deposes that the reason for transferring the file out of the firm was for cost considerations. Mr. Mark Arnold’s July 31, 2011 email response to Ms Yueh and Cleanol’s conflict challenge specifically states that he will not be acting for Quintin Johnstone to avoid any concerns of conflict of interest. Cost considerations were not mentioned. Certainly Mr. Johnstone ought to have known that bringing Mr. Mark Arnold back into the file would reignite the conflict challenge.
Perhaps Mr. Johnstone turned to Mr. Mark Arnold to assist at trial because of his perceived familiarity with the case. Since Mr. Mark Arnold removed himself from the file prior to the pleadings stage, his familiarity would be minimal. Sending Mr. Johnstone elsewhere for counsel to assist at trial is not overly onerous. There are many well qualified, experienced trial lawyers in Toronto.
As stated by the Supreme Court of Canada, the integrity of the judicial system is of such fundamental importance that it takes precedence over Mr. Johnstone’s right to counsel of his choice to assist at trial. It is a conflict for Mr. Mark Arnold of the law firm Gardiner, Miller, Arnold LLP to act for Mr. Johnstone against Cleanol and Ms Yueh, whether as counsel of record, as co-counsel or as counsel advising in the background.
Conclusion
The motion brought by Cleanol and Ms Yueh is granted. Mr. Mark Arnold and Gardner, Miller Arnold LLP may not act for Mr. Johnstone against Cleanol and Ms Yueh in this trial.
The trial will proceed as scheduled, beginning August 5, 2014. No adjournment will be permitted by reason of Mr. Johnstone retaining co-counsel who is unavailable on the fixed trial dates. Before retaining co-counsel Mr. Johnstone must provide him or her with a copy of these reasons.
It is appropriate for costs to follow the event. Both parties filed costs outlines. Taking into account the factors described in rule 57.01 as well as section 86 of the Construction Lien Act, R.S.O. 1990, c.C.30, particularly complexity, proportionality, importance of the issues and reasonable expectation of the parties, I fix costs on a partial indemnity scale at $5,000.00 including fees, disbursements and taxes, payable by Mr. Johnstone to Cleanol and Ms Yueh in any event of the cause.
Master C. Albert .
DATE: June 24, 2014
COURT FILE NO.: CV-11-431927
and COURT FILE NO.: CV-13-472728
DATE: June 24, 1914
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: CLEANOL INTEGRATED SERVICES LTD. v QUINTIN JOHNSTONE
AND RE: JOHNSTONE v YUEH and GIAMPETRO
BEFORE: Master C. Albert
COUNSEL: L. O’Connor for Cleanol and Yueh, moving parties tel: 416-365-1110; fax: 416-365-1876
Jonah Arnold for Johnstone, responding party, tel: 416-640-0508; fax: 416-848-0200
ENDORSEMENT
Master C. Albert
DATE: June 24, 2014
[1] [2004] O.J. No. 1788 at paragraph 38
[2] Jonah Arnold also happens to be Mark Arnold’s son, but the relationship of Mark Arnold and Jonah Arnold is not the basis of Cleanol’s and Ms Yueh’s conflict of interest concern.
[3] 2014 CarswellOnt 6371, 2014 ONSC 2979 at paragraph 7
[4] (1990), 1990 32 (SCC), 77 D.L.R.(4th) 249 (S.C.C.) at paragraphs 57 and 58
[5] MacDonald v Martin, supra, per Cory, J. at paragraph 58
[6] My order fixing the motion date directed that there be no cross-examinations. At the opening of the motion hearing Mr. Johnstone’s counsel asked to adjourn the motion to cross-examine Ms Yueh, based on his concern that the evidence conflicted and findings of credibility would be required on the motion. With the fixed trial date approaching quickly, rather than adjourn and delay the motion hearing I invited counsel to cross-examine Ms Yueh on her affidavit at the motion hearing. He declined to do so.